ISRI 2014 Convention: No substitute for ferrous scrap

The role of global trade in the ferrous scrap and steel industries as well as the potential effects of increased direct reduced iron (DRI) production were topics of discussion at the Ferrous Spotlight session at the Institute of Scrap Recycling Industries Inc. (ISRI) 2014 Convention & Exposition, held in Las Vegas in April.

Global trade issues were mentioned by Thomas Danjczek, past president of the U.S.-based Steel Manufacturers Association, Washinton, D.C., who noted that in recent years the United States has been the No. 1 importer of finished steel while it is not even in the top 10 among steel exporting nations.

Since 2003, said Danjczek, imported steel has accounted for an average of 26 percent of the steel consumed each year in the United States.

Although this open market may have cost the U.S. steel industry up to 87,000 jobs, Danjczek estimated, it has made the domestic steel industry resilient and well-positioned to compete. Danjczek cited low energy costs, access to the world’s largest capital markets and self-sufficiency in steelmaking raw materials as reasons for optimism within the U.S. steel sector.

Panelist John Harris, a former ArcelorMittal raw materials purchaser who is now CEO of Canada-based metals sector information service Aaristic Services Inc., characterized Turkey as being “in turmoil.” This, said Harris, could soon lead to trouble in the ferrous scrap markets, where Turkey serves as the single largest importer of globally traded ferrous scrap.

While some steel and scrap industry analysts have predicted that China could become a net exporter of ferrous scrap in the next 10 years, Harris was not convinced. Rather, Harris said the country’s steel mills will tap into the ferrous scrap supply. “They are looking at increasing their scrap consumption by 5 percent,” he said.

Considering China produces some 780 million metric tons of steel each year, Harris noted that just a 1 percent increase in scrap consumption by mills there amounts to the absorption of some 7 million tons of ferrous scrap.

The panel also discussed the effects of steelmakers putting capital and renewed effort into producing direct reduced iron (DRI) and other alternative iron units that compete with (or blend with) scrap as feedstock at electric arc furnace (EAF) steel mills.

Harris said the DRI being produced in places like St. James Parish, La., by Nucor Corp., was intended to be “a replacement for busheling.”

Danjczek said he was not convinced DRI was suitable for the role. “Whoever called [DRI] a scrap substitute should be shot,” stated Danjczek.

Recalling his prior career in the steel industry, Danjczek said at EAF mills DRI and similar iron units “took more energy and took longer” to melt. Their role, he said, was valuable when “metallurgically I needed the chemistry change.”

Rather than being a threat to ferrous scrap, Danjczek said investments in DRI production (which Harris deemed likely with America’s access to additional natural gas reserves) will help the EAF sector compete more strongly with integrated steelmakers.

“I don’t follow the busheling theory,” he stated. “DRI will cause more scrap to be used in the U.S. It will replace hot metal.”